Episode 062

Behind the rise of Tech Data: Steve Raymund talks decision-making, acquisitions and customer-first mentality

On this episode of SPx, Joe is joined in the studio by the former CEO of Tech Data, Steve Raymund. Raymund stepped down as chairmain of the board of Tech Data in 2017, following 36 years with the company. Tech Data was founded by Raymund's father, but it was under his own leadership that the company began its meteoric rise, going national and then global to become one of the Florida's largest companies.

"And in a lot of ways it's more fun to build a business towards success rather than actually achieving it because once you get there people put their hands up and go well, what do I do now?"

 

Table of Contents

(00:00 to  1:22) Introduction

(01:22 to 03:05) The Beginning of Tech Data

(03:05 to 07:24) Expanding Tech Data

(07:24 to 11:45) Company Culture and Acquisitions

(11:45 to 13:55)  Steve’s View of the Tampa, Bay Area

(13:55 to 14:46)  Investing Locally

(14:46 to 16:38) Giving Back

(16:39 to 22:26) Steve’s Legacy and Tech Data’s Success

(22:26 to 23:40 ) Finding New Purpose

(23:40 to 25:19) Conclusion

 

Full Transcript:

Joe: Joining me today on SPx is Steve Raymund the former CEO and chairman of the board at Tech Data and the mind behind the rise of Tech Data, currently serves on the Jabil board and the WestCo board in both instances as chairman of the audit committees. Welcome.

 

Steve: Thank you very much, it’s nice to be here.

 

Joe: So, I would love to start by going back to the beginning of Tech Data, it was a company that your father owned at the time and you came in, it had a dozen employees at one point, and went on linear, but somewhat meteoric rise over the next 10 years or so. From a couple of million in revenue into the tens of billions in revenue. So, in the beginning when you went to work with your dad can you sort of talk about what your vision was at that point, where you just focused on execution, or did you actually even at that time have designs on getting to the heights that the company did?

 

[00:01:50]

 

Steve: Well, when I started I wasn’t much more than a gopher. It was my dad’s second business which he was running part-time, he needed some help in trying to transition the model or extend the model into mail order. So, I was helping to build a catalogue, but I really knew nothing about business, certainly nothing that would enable me to judge or assess the business as it was then and then come up with a strategy to take it forward. The business was very different then, it was a completely different business model doing retail distribution in the Tampa Bay area of data supplies. And over the course of time really within about a year we changed into a wholesale, I bought out the majority of the company from my dad first. And then we changed the model from retail distribution of things like magnetic tape and diskettes to wholesale distribution of the supplies selling only to resellers. And then overtime began to acquire more and more product lines. So, building the product and vendor portfolio and then expanding out geographically from Florida into the Southeast, Northeast, and so on.

 

Joe: And so during that time even when you say you didn’t really know the business that well when you first started, but through that time on into the growth, I don’t even know if you can parse these out, but was it a vision, or an expectation, or a feeling of bigness that was pulling you? Or was it just superior execution that ultimately got you there?

 

Steve: I think at the time all I wanted to do was grow the business by serving my customers as well as we could and hopefully better than others. So, I spent a lot of time in the field interviewing our customers, talking to them about their business requirements, the products they were selling, what they were looking for from a distribution partner, and then going back to the office and trying to fashion a machine that would be responsive to their needs. And that was pretty much it because it was a time in which the computer industry was booming. All you had to do was try and catch the wave and if you could catch it and keep on it you were going to grow and prosper. Now over the longer term doing that was not sufficient. You had to refine the model and make adjustments, be more cost competitive because gross margins fell by two thirds from the time I started say to four or five years later. So, you know, clearly adjustments had to be made along the way in order to continue prospering. 

 

[00:04:03]

 

Joe: And was there ever a time where just by the sheer volume and size and the responsibility that comes with the large employee base and the impact even that you make on the local community that you were sort of forced into thinking about things more from the macro or from the community or even local economy standpoint. And I would assume that those sorts of things would translate into your work on the different boards. Or were you actually able just to go the whole way just straight on solid execution?

 

Steve: Well, you know, execution alone does not a competitor make. You have to do a lot of other things in terms of how you position the company strategically, how you see the future evolving and the kind of bets you’re going to make today and whether they’ll pay off tomorrow. So, should we do this acquisition? Should we expand into Europe? That entails great cost and risk but maybe it’s a necessary step for us to take to ensure long-term health. So, it wasn’t just about execute, execute, execute, scale, scale, scale. After a while we had to make some very hard decisions about who we wanted to be three, four, five years from now. Did we want to be local? Did we want to be niche-oriented? Did we want to be global? Did we want to be a broad assortment kind of commodity supplier, which is ultimately what we chose to do. 

 

Joe: And can you walk through that decision process and sort of the elements, how you weighted the elements in making those choices?

 

Steve: Well, it’s really a series of decisions made over the course of time based on how we saw the market evolving. I think the first phase of our development, if you broke it into different phases the first thing I already talked about, we changed models, so retail to wholesale. The next thing we did was let’s go acquire some more products. So, I’d visit the customers, they’re selling MDEC monitors, and Epson printers, and Apple computers, and which of these products can we earn the right franchise to distribute and maybe they’ll buy from us instead of Micro America, or Ingram, or one of the competitors out there. So, that was kind of phase one. And then the next phase was how do we expand geographically into the U.S. because there’s clearly a lot of demand out there that we could supply. We had a model that appeared to be pretty cost efficient, very telemarketing oriented, centralized administration, sales, back office. And it was working, we were executing really well. 

 

[00:06:16]

 

So, then the next step of our evolution was okay, let’s expand geographically, but what should that look like? You know, do we open offices, do we open branches? Do we just put some feet on the street? Do we need warehouses? So, we made some decisions around that based on some study in analytics that turned out to be the right bets. Then we had a whole set of competitors that were selling the most important product lines like Apple, and Compaq, and HP, we couldn’t get our hands on that, but we kept pounding on the door and pointing out the capabilities we had versus their traditional kind of closed distribution model. And when they decided to open things up we were there. And on and on it went, but I think the next big move for us was the decision to go global essentially. And we did that through a series, mostly of acquisitions, a little bit of organic growth, but we had stubbed our toe along the way, had some great successes. Probably kind of a mixed bag in terms of results during my time. And my successors at this point I think did a much better job at running a big global corporation then I was capable of doing at the time. 

 

Joe: Tech Data was always a strong partner to the resellers. And you’re very pragmatic and I think the reputation that Tech Data had was that of fair, pragmatic. Can you talk about the culture? I mean, the culture obviously emanated from you and your father, but as you grew and made acquisitions of other people’s cultures how much did culture play into those conversations and what did you do to sculpt that?

 

[00:07:46]

 

Steve: Well, I think there’s probably several different dimensions and the first would be always to insist on integrity and transparency in everything that we do whether it’s dealing with our board, our investors, our employees, our customers. If we had issues we were front and center with it. When we described our capabilities, we were very, let’s say – conservative – and tried to be accurate and not over promised. You know, the classic thing you under-promise and over-deliver, I think that was very embedded in our culture. And then I think the overall kind of rhythm of the place was about operational excellence and we just focused on that because it was a business of basis points, there wasn’t a lot of inventing going on, it was really how can we take out five more basis points, how can we remix our business to improve the margin yield overall? And all of that required today would be a lot more in the way of kind of big data analytics. We did a pretty good job of it at the time, and then also identifying additional services. So, I think it was really transparency, integrity, team work, and execution. 

 

Joe: Wonderful. One of the biggest stretches to culture and just an organization in general has come through acquisitions and especially large acquisitions. You made a very large acquisition Computer 2000, what are the lessons learned or some of your thoughts on that?

 

Steve: Well, it was a huge acquisition, almost a merger because at the time their revenue might have been pretty close to what ours was in the five, six, seven-billion-dollar range we might have been a little larger and somewhat more profitable. And although it wasn’t a hostile takeover, we did not enjoy the support of the senior management team which is primarily German based in Munich. The shareholders were eager to sell it and monetize their investment, but the management team really thought of themselves as being the potential suitor, not the target. So, we kind of had to get over that. And in the end, you know, several of the top guys left and behind them in a few areas we kind of had to sweep up a little bit of a mess. So, it took us a few years to get everything squared away, and ultimately it paid off for us, but not without a few bumps in the road along the way. And I think we should have paid more attention to these cultural issues and understanding what the local people really wanted, how they wanted to see their career in the business evolve and work more collaboratively with them to help align our two approaches.

 

[00:10:00]

 

Joe: And there’s two separate challenges there, one is getting the upper management on-board, which may have never happened, but then beyond that it’s sort of the more logistical connecting with the employees of the company. And so, when you talk about things that you might have done differently it might have been more of that second one to really dig into getting them onboard. 

 

Steve: Well, I actually think we did quite a bit in that regard. I think it was really working kind of closer with the country managers on both finance and operating side in a way so that we could bypass some of the senior management team, particularly when it was unstable. So, we could probably have done more to forge closer links there. Again, mergers are difficult, cross-border mergers are even more difficult. And to make it even worse it was a merger with a reluctant partner on the other side. So, you know, looking at it from my perspective now I’m not sure that we would have done it because it ended up being a lot more work and pain then we anticipated. In the end, it all worked out, but it was hard.

 

Joe: Right, it was hard. And so, when you have reluctant absorbees, and sabotage is a strong word, but just being a weight, sort of not supporting change, just spreading a little poison into the culture, were you too kind about that? Or is that one place you would have been a little more aggressive to stamp that out in hindsight?

 

Steve: In hindsight if I were to do it again and actually go through with the acquisition we would have done more work in identifying the talent pool, grooming, developing, kind of the replacement senior managers and kind of move more quickly and proactively to remove the team that wasn’t in support of the deal, that were sort of passive resisters to it and just get them out because I think you’re right, they are toxic to the culture. 

 

Joe: Let’s turn to Tampa Bay. You exited Tech Data very successfully and you’ve chosen to live and stay here and be a part of the community on the board of Jabil. You know, since you retired which has been about 12 to 13 years now since you stepped out of Tech Data, how have you seen the Tampa Bay ecosystem change? What do you love? What do you think we need more of? What is sort of your state of the bay?

 

[00:12:05]

 

Steve: Well, I like living here and I like it more now than I used to frankly 10 or 15 years ago because the area has changed, it’s grown more cosmopolitan, there’s more entertainment options, better dining options, more interesting people moving in. So, we’re attracting a lot of talent and cool people from other places. So, it really has a different personality today than 15 years ago, I like all of that a lot and I’m happy to live here and call it my home. You know, the flip side is that I don’t think the area is really keeping up with the growth. I purposely live in an area and have an office where I can get there very quickly and easily, but I hate going north of say Park Blvd let alone Ulmerton or crossing the bridges because that’s going to be my day. Sort of, I have to plan around the traffic and it really shouldn’t be that way. You know, I don’t think we have the right leadership or something in the overall Bay Area or maybe there’s not that sufficient support at the grass roots level by the population. But what’s really missing here is some vision around mass transit and starting to build a long-term plan. I think we’re the only large metropolitan area without surface rail for example. Out of all the others, assuming they have it in Texas, they have it in Phoenix, they have it in Denver, they have it all over the place in more modern, sort of, spread out cities. They’re still making those investments. And I’ve personally invested quite a bit in real estate development in Charlotte which has some very successful light rail system there. And a lot of the new development is taking place around the stops and the hubs. So, you’re getting more density, more clustered. So, we need to be thinking like that here. I think the other area is, and I don’t know what the solution is, but I hear particularly in Hillsborough County the school system is kind of on its heels. It’s very poor and not keeping up with the demands particularly of high-tech companies that need to have access to highly quality talent. 

 

Joe: And you mentioned investing in Charlotte, what are some of the things both in maybe real estate, but more in lines of start-ups or young companies here, what’s been your sort of philosophy on investing in those types of things?

 

[00:14:03]

 

Steve: I haven’t done much, I’ve done a couple of small things like Florida Funders which is as much as anything to be a good sport to try and be a resource and help the tech community here develop. But it’s not been a real priority for me. I’ve done quite a bit in philanthropy and quite a bit again with the corporations including I was on the board for a couple of years at ConnectWise which was arguably one of the most successful technology companies we’ve seen grow here in Tampa Bay and with a very successful exit about a year ago selling the company… And then now the exit for Tech Data going into private equity. So, I really haven’t been that involved with kind of tech state-up community, more larger corporations than community stuff.

 

Joe: Right, and you mentioned being a resource. One of the things I think is interesting in Tampa Bay is that you being the leader of one of the successes that you grew from a modest company up to a juggernaut, there are not many of those. And so, you’re sort of forced into a business celebrity status here, right? You’re in demand, we saw you at TiEcon last year, you’re here now. So, coming from just a guy who grew his business up to that, how have you found that experience? Have you been able to largely make it the way you want to make it? Or how have you experienced that?

 

Steve: Well, I think it’s worthwhile to point out that I don’t spend a lot of time on these kinds of efforts. I don’t get calls every week asking that I appear on some panel or participate on some program. Occasionally I get a call and if I have time I like to help out, it’s fun. It comes and maybe falls under the rubric of giving back because most of these things I do it’s not for money, you know, when I go to TiEcon I’m not going to get anything at all out of personally other then try to be helpful to other young entrepreneurs. Which, for me, and also for other people I know in my situation they find very rewarding. 

 

Joe: I thought you gave some great insight at that event. So, let’s take it then in it seems like the area you’ve had the most energy in what you’ve done is in philanthropy. So, what’s sort of your philosophy of giving and where do you like to plug in there? 

 

[00:15:57]

 

Steve: Generally, where I’ve been giving, you know, it’s a reasonable amount of money I suppose for my overall balance sheet if you will, but it’s not massive, it’s not the Gates Foundation by about a gazillion miles. So, I tend to focus more on the local community or those institutions in which I have some personal knowledge or involvement. So, you know, I’ve given to Shorecrest because my kids went there, I’ve given to The Dalí because I’m on the board there. I’ve given to All Children’s Hospital because I serve on the board there. So, I personally touch these organizations, I know the senior management. I have confidence in their competence and their ability to use my money and other financial support they’re receiving effectively and responsibility. 

 

Joe: Wonderful. And that sort of leads into the idea of legacy. Do you place much value in legacy? And if so, how do you feel about yours now? And is there any adjustments or motivation to do anything different then what’s happened thus far?

 

Steve: To be honest, I don’t really think about it very much. I just try to live my life day to day and be nice to people, have fun, behave, get some things done. 

 

Joe: How hard is it to behave?

 

Steve: Sometimes that’s the hard part, no generally it’s gotten easier as I’ve gotten older. So, I don’t really spend a lot of time thinking about the legacy that I’m leaving behind frankly, it actually has no meaning in my day to day life. 

 

Joe: So, if not legacy, which I respect that, I think that’s living for yourself and living each day for yourself, let’s call it purpose. 

 

Steve: I should admit though when I do drive by the Tech Data building my chest does puff up a little bit. And when people say wow, that’s such a great company I feel a little bit of pride, but I try to level it with humility and realize it doesn’t really matter in terms of how I live my life today.

 

Joe: Sure. It is rare that a lot of companies get their launch pad or become the rocket ship a lot of times out of luck, a lot of times out of the right time, right place. You know, and obviously you had some moments of all of that, but it really feels like you’re one of the few companies that I can put my finger on that literally just did good business and grinded it out and just grew through sheer execution, through good decisions, through dotting your i’s and crossing your t’s. And I think that’s rare, and a lot of these times you get stuck in the sort of survivorship bias looking at a company that made it and then looking back and attributing some magic to the choices that they made. But when I do that with Tech Data I legitimately believe in the choices that you made. 

 

[00:18:14]

 

Steve: Well, I think we were always focused on our customer first and foremost and organized most of our efforts and strategies around how do we serve them better and how can we do it more efficiently because the margin pressure was unrelenting. So, you had to figure out ways to make money in a marketplace that was very commodity driven in terms of the pricing power that we had which was new. I mean, it was like selling weed on the market, the price was the price. And so, we had to kind of look inside in the company as to how you could still be competitive. 

 

Joe: Right.

 

Steve: The next thing I would note is that in a company in the course of its life the management team has to make a lot of decisions. And they’re successful if maybe 55% of them are good, but I can talk all day and all night about all the bad decisions that we made and missed opportunities as well. It happens that we got a few of the important things right, and we had a great team. So, even when we maybe miscalculated or didn’t make the best choice, like I was talking about with our acquisition in Europe, you know, maybe not perfectly conceived, but we had a really good team, we were able to grind through it, persevere, and come out the other end very successfully. 

 

Joe: I would say that a lot of companies focus on customer, maybe not to the degree, or maybe they don’t do it as seriously and for real, but I think some of them do, everybody says it. So, it’s more than just that, there’s something in there beyond.

 

Steve: Well, it was a fun business because it was all repeat. So, everybody you were doing business with today, you know, if things went well you’re going to be doing business with them tomorrow, and the next day, and so on, forever. So, you had to have a real partnership mindset. For both our customers we were selling to, but in some ways more importantly with our vendors because without the vendors we were out of business, especially with the kind of concentration with HP, Cisco, Apple, Microsoft, companies like this were huge, they didn’t need to use our services. So, it was incumbent upon us all the time to court them, remind them about the value that we were providing, look for better opportunities, new opportunities to partner with them and help them develop their marketplace so that we could be a real value-added service for them. So, we knew where we sat in the food chain. And you know, it was not the strongest place, it was a good place, but you had to be smart, you had to be astute about how to exercise what little bit of power you might have there sitting in the middle of the value chain in ways that could create value for us and also deliver value to our partners.

 

[00:20:31]

 

Joe: And sort of riffing back on culture a little bit, when you have a – to your point – a commodity price sort of control in the play and you turn inside, I mean, that’s really just efficiency and to some extent cost-cutting. And I think that’s also a little bit of the magic because I think a lot of the companies that define themselves in that position the culture and the actual day to day living that the business can get really, really thin really quickly because of that. If the pressure is constantly on saving money, that’s ultimately lower salaries, less x, y, z, anything that costs money becomes the enemy because that’s the only way to increase your profits. 

 

Steve: Yeah.

 

Joe: And to navigate that is in a way that keeps the culture positive and lets it thrive and keeps the partnerships positive I think is a little bit of magic. 

 

Steve: That’s all very true, and we had to focus non-stop on cost and what we could do to lean out the operation to become more efficient and improve our revenue per head, and we did that very successfully. I think we were successful because we stayed humble. We were never the biggest company in the business, we were never the go-to one, sort of the 900-pound gorilla, we always felt like we were catching up in the early days to lots of leaders that were ahead of us. And then later on there were other companies, primarily I would say in Ingram, it was larger than we were and they had a reputation as being rather full of themselves because they were so much bigger than everybody else. So, we remained very humble, always looking for opportunities particularly with our suppliers to find ways that we could partner with them to help them develop their market share or their opportunities. We were very attuned to that. So, I think part of it actually is because of the legacy of my dad’s business where he was a manufacturer’s rep. So, his customers in many respects were his suppliers, what he would call his principles. And he pandered to them as he needed to. And I took a lesson from that experience and realized to be successful we had to make sure that Apple saw us as a really value-added extension of their salesmen marketing effort. And the same with HP and all of the other vendors. 

 

[00:22:26]

 

Joe: I think I cut you off a little bit. We were talking about legacy and I was actually transitioning that into purpose which I think is maybe a more fitting noun to use, or whatever. And I ask this from the sense that you’re a thinking person clearly, you have been successful, you have the means to do whatever you want. And so, that puts you in a unique position to have an access to meaning that others may not. And so, that’s sort of the lens with which I’m asking you having gone through all of that, where did your purpose end up? 

 

Steve: Well, it’s a little paradoxical actually because I know a lot of rich people and I know a lot of poor people. And I can’t really say that there’s a one-to-one correlation between money and happiness. In fact, sometimes it’s the opposite, too much money people don’t know what to do with themselves, they’re already successful, how can they prove themselves? Where can they find meaning? And in a lot of ways it’s more fun to build a business towards success rather than actually achieving it because once you get there people put their hands up and go well, what do I do now? So, that presents a different set of problems where there’s an opportunity to kind of repurpose yourself and sort of reengineer your brain and what gives you a sense of meaning in the world. And for me that’s a question of focusing more on family, friends, my community, and finding purpose in these kinds of connections and trying to help people. 

 

Joe: Wonderful. So, we end some of our shows with a shoutout. And I’d be curious to hear who you think in the community that’s maybe not getting as much attention as they should be, or maybe they are, but who do you think is doing well?

 

Steve: For me personality, you know, in the last couple of years especially I continue to enjoy my association with Jabil. You know, it’s become a huge company, fantastically successful providing all kinds of great career opportunities for literally thousands of people in this area. And over the years has also become a lot more high profile in terms of philanthropy. So, I’m really quite proud to be associated with them. 

 

Joe: Wonderful, well I’ve appreciated your time and thank you.

 

Steve: Thank you very much Joe. 

 

Transcription ends [00:24:19]